Government Runs Out Of Money

Dear Editor

The DA takes note of the revelation that President Cyril Ramaphosa, Finance Minister Enoch Godongwana, and Reserve Bank Governor Lesetja Kganyago have met urgently in a desperate attempt to respond to the growing government-induced public financial crisis.

It is reported that the meeting followed the announcement from Treasury that it would need to implement urgent measures to curb runaway government expenditure amid deteriorating public finances – the situation is exacerbated by Treasury’s overoptimistic projections in its February budget.

The DA raised concern that there was no provision in the February 2023 Budget for an extension of the Social Relief of Distress Grant (SRD) beyond April 2024. In response, government stated that a revised social security model was being designed, followed by silence. This meeting may well be part of a desperate scramble to find money to fund an extension of the grant and also to plug the massive gap between projected revenue and actual revenue.

The simple fact is that government has run out of money and cannot fund items budgeted in February, let alone the SRD.

The root cause of this crisis remains tepid economic growth, merely 0.6% in the last quarter, well below government’s own projections. This is a direct result of failed economic policy and poor fiscal choices, such as positioning government in the wrong place in the economy; a bloated cabinet; a proliferation of agencies that are nothing more than expensive employment agencies for ANC cadres; keeping hopelessly bankrupt State-owned Enterprises (SOEs) barely afloat; an energy crisis that has significantly disrupted the ability of business to function and systemic corruption that has led to greylisting and driven out business confidence and deterred local and foreign investment. The list goes on.

It appears that government is unable to make the hard choices that are required to keep South Africa financially afloat. Cutting expenditure on the periphery won’t work. Offering early retirement to public sector employees; cutting back on visible policing and other essential services won’t make any difference. Cutting the size of the bloated cabinet would be a positive step, and that would need to include slimming the public service of the overpaid, underproductive management layers and not overworked front-line service providers.

Decades of economic mismanagement have now come to a head. Poor economic policy choices, coupled with government veering off its stated non-aligned position has resulted in a hostile environment for investment.

The ANC-government has run out of financial road and the Minister of Finance has nowhere to turn. It will need to cut expenditure and finance an extension of the SRD, without access to more borrowing. A very tough space indeed.

Something will need to change and the best solution for South Africa would be a new government that can start the process of turning our battered economy around, before it is too late. The DA will present our alt MTBPS that will set out how a DA government would tackle the current, untenable, situation.

Regards

Dr Dion George MP
DA Shadow Minister of Finance